Should I Buy a House Now for the First Time Or Should I Rent?
It's a big decision to buy a house for the first time, especially right now. Owning your own house, rather than renting, is an opportunity to build a financial nest egg for the future, if conditions are right. You are wise to plan ahead for your future.
Should you buy a house now, or rent? To decide, here are the questions to ask yourself if you are a first-time buyer.
- Do you really want to own a house? Do you want the responsibility of mortgage payments, cutting the grass, painting and maintaining a house? Here's more Information for the First-Time Home Buyer.
- Do you expect to be living in the house you buy for at least five years? It does not make sense to buy a house and pay the up-front closing costs if you will be moving soon. When you buy a house, closing costs are 2% to 3% of the cost of the house. It is easier and less expensive to relocate when you rent.
- You should buy a house for the first time only if you expect housing prices to rise in the future. Historically, home values usually rise, but no one can predict the future with certainty. During an economic downturn, the value of houses falls and they do not sell quickly. Are you prepared to ride out a weak housing market?
- You should think about buying your first house if the rent you are paying is more than what you would pay for mortgage, property taxes, insurance and utilities on a house. Consider also the cost of house utilities, including gas, electricity, water, and cable.
- You should buy a house right now rather than rent only if you have saved enough money for the down payment, usually about 20% of the purchase price of the house. Of course, you can buy a house for the first time with a smaller down payment, but the rate of interest on your house mortgage will be higher, and your monthly payments will be higher. See this for how to save money on a home mortgage loan.
- If you should buy a house for the first time rather than rent, can you budget for the expenses of owning a home? It's a good idea to pretend you own a house, and set aside the money you would need for mortgage payments, property taxes, insurance and maintenance and utilities, minus what you pay in rent. If you are able to save this amount of money every month, you should be ready to buy a house.
- You should buy a house right now if you believe mortgage interest rates are at an all-time low. It's a good idea to buy your first house before interest rates start rising again.
- You should buy your first house right now only if you can qualify for a home mortgage and you have good credit. The bank or other lender will check your FICO credit score and do a credit check. See this how-to article about your FICO credit score and credit report.
- You should buy your first house only if your other debts, like credit cards, alimony and child support, are less than 30% of your take-home pay. You must be financially able to make mortgage payments, and pay the other expenses of home ownership, like property taxes, insurance, utilities and maintenance, every month.
- If you buy your first house, you can get a federal income tax benefit every year. You can itemize your homeowner deductions like property taxes and mortgage interest on Schedule A of your tax return. Your homeowner deductions are usually more than your standard deduction. These deductions are not available if you rent.
Another tax incentive, the federal income tax credit for a first-time homebuyer, was available if you bought your first house between April 8, 2008 and May 1, 2010.
- You should buy your first house right now only if your relationship and your job are stable. If you separate from your partner or lose your job, you may be forced to sell your house quickly and at a substantial loss.
- You should buy your first house right now only if you have money saved for a rainy day, an emergency fund for unpredictible, but necessary, expenses.
- You should buy a house right now only if you are willing to make adjustments in your lifestyle to meet your new financial obligations. You might have to forego vacations, impulse spending, and entertainment so that you can meet your monthly house expenses.
I hope life brings you much success.
I wish you a very happy day.
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